Archive for September, 2010

September 27th, 2010 Comments Off on CONGRESS WANTS TO LEVEL THE PLAYING FIELD?

Well, we haven’t had a chance to chat about what it going on in Congress lately, mostly because nothing was going on for labor and employment enthusiasts like us. Instead, members of Congress have been busy with stuff like picking at the other side of the isle, health care reform and campaigning. So, just when you think all we are going to have to worry about for the next couple of months is the incessant political ads during the football game, along come Senator Kerry and Representative McDermott. The Senator introduced S. 3786 and the Congressman simultaneously introduced HR. 6128. Both bills are entitled the Fair Playing Field Act of 2010 and they both seek to do the exact same thing: amend the Internal Revenue Code of 1986 to allow the Secretary of the Treasury to “provide guidance allowing workers and businesses to clearly understand the proper federal tax classification of workers and to provide relief allowing an orderly transition to new rules designed to increase certainty and uniformity of treatment.” What? Let me try that again. The bills are designed to make more workers employees and less workers independent contractors.

According to Senator Kerry, the bills “will ensure workers are afforded protections already in the law, such as workers’ compensation, Social Security, Medicare, payment of overtime, unemployment compensation, and the minimum wage. It will also ensure employers who play by the rules are not forced to compete against those businesses that don’t.” I like this new trend of claiming that what the Congress is really trying to do is make things fair not only for employees but for “businesses that play by the rules.” So how does the bill close this “loophole” as Senator Kerry terms it? Well, let’s ask Senator Kerry.

“The Fair Playing Field Act of 2010 ends the moratorium on IRS guidance addressing the worker classification issue. The legislation requires the Secretary of Treasury to issue prospective guidance clarifying the employment status of individuals for Federal employment tax purposes. The effective date for the provision of authority to issue guidance is the date of enactment.”

In addition to closing this “loophole,” the bill will require employers who use independent contractors to provide “a written statement to such independent contractor notifying such independent contractor of the Federal tax obligations of an independent contractor, the labor and employment law protections that do not apply to independent contractors, and the right of such independent contractor to seek a status determination from the Internal Revenue Service.”

As many of us already know, the IRS and the Department of Labor are already cracking down on what they call “employee misclassification.” So what is this bill really about? How about cash? Don’t believe me? Let’s ask Senator Kerry: “Federal and State revenue is lost when businesses misclassify their workers as independent contractors. A study estimated that, between 1996 and 2004, $34.7 billion of Federal tax revenues went uncollected due to the misclassification of workers and the tax loopholes that allow it.”

Now, you are probably saying, “Wait! I use independent contractors all the time. What do I do?” And when you are asking yourself that question, there is one thing I want you to be really careful about. A cottage industry has sprung up among consultants who will tell you that, for a price, they will come in and look at all of your independent contractors and provide you with a nice report about who is properly classified and who is not. Before you go ahead and hire them, remember this: that report, done by that consultant, will be discoverable if you get sued. That’s right, you will have paid a consultant a lot of money to produce what is in essence a plaintiff’s expert report. It won’t take long for the court or a jury to read that report and decide that you are breaking the law and you knew you were doing it. Oh, by the way, it won’t do you any good to have your HR department do the report themselves, it will still be discoverable. So what should you do? You call us (your lawyers) and let us help. In the meantime, we will keep an eye on this bill.

Yes, it is that time of year again. No, I’m not talking about back to school time or even the start of the football season. I’m talking about something much more exciting. It’s time to file your EEO-1. That’s right, September 30, 2010 is the filing deadline for your EEO-1 report.

As I am sure you all know by now, you have to file an EEO-1 if you are a private employer subject to Title VII of the Civil Rights Act of 1964 and you have 100 or more employees, or if you are a private employer who has a “government contract, subcontract or purchase order amounting to $50,000 or more” and you have 50 or more employees. The EEOC says that you should have received your filing material sometime in mid-August. The preferred method for filing the EEO-1 is the EEOC’s web-based filing system.

About

Steven Palazzolo brings a unique and varied background to the practice of labor and employment law. Prior to attending law school, Steve spent seven years as a shop floor supervisor in both union and non-union food processing plants. Steve also spent 11 years as in-house counsel specializing in labor and employment law for a multi-billion-dollar multinational corporation with extensive manufacturing operations. During this time Steve also supervised a staff of HR professionals. Steve represents employers, emphasizing counseling clients on employee relations issues, policy development, NLRB, ADA, FMLA and international labor relations. Steve has experience in acquisitions, immigration, employee benefits, campaign finance, employment litigation, civil rights and related issues, and has provided counsel to companies in the agricultural, food processing, hospitality, manufacturing and marketing industries in the United States, South and Central America, Europe and Asia. He currently provides counsel to a variety of leading Midwest businesses.

Don’t forget, this blog is for informational purposes only and is not intended to provide legal advice. You should not act based solely on the contents of this blog. The answers to legal questions often depend upon the specific matter at hand. If you have a legal question, contact your lawyer. For more information or a consultation contact spalazzolo@wnj.com.